(WSJ) China’s highflying box office got a reality check in 2016, as cutbacks in discounted tickets and a crackdown on “ghost screenings” led to a sharp decline in cinema-revenue growth.
Ticket sales in China topped 45 billion yuan ($6.48 billion) as of Thursday, according to Beijing-based film-research firm EntGroup —up 2.2% over 2015.
“It was bound to happen,” said Rob Cain, a Los Angeles-based film producer and consultant to Hollywood studios. “If it had continued at the rate it did, the Chinese box office would have consumed every single bit of currency on earth.”
China’s box office grew slightly more than the U.S.’s, which is projected to show a 1.9% increase to nearly $11.4 billion, according to analytics firm comScore. But it comes on the heels of an expansion that averaged 34% over the previous five years, culminating in last year’s jump of 49%.
Much of that growth was legitimate, fueled by China’s fast-paced rollout of theaters and the widespread adoption of online- and mobile-ticketing platforms. But the rise was also enabled by discounted ticket prices to lure in new filmgoers and ghost screenings in which movie distributors buy tickets in bulk to make a flop look like a hit.
“As markets mature, there tends to be a more discerning audience,” said Sanford Panitch, president at Sony Corp.’s Columbia Pictures. “It’s not, ‘Wow, it’s a Hollywood film.’ There’s a bit more choice and more local choice.”
By local choice, Mr. Panitch was referring to homegrown Chinese productions. The biggest film in China this year was “The Mermaid,” a slapstick-fantasy film by Hong Kong hit maker Stephen Chow that grossed more than $526 million domestically. That is more than double the take of the box-office runner-up, Disney’s “Zootopia.”
Still, it has been a thin year for must-see films, according to some analysts. To shore up ticket sales, Chinese regulators quietly expanded the quota on foreign films that get a cut of the box office to at least 39 films this year, a Wall Street Journal analysis shows, or five more than the 34 films typically allowed.
Sun Xia, a 28-year-old English teacher in Shanghai, said she went to the movies at least once a month in 2015, enjoying titles such as “Furious 7” and the Chinese blockbuster “Monster Hunt.” But Ms. Sun said 2016’s slate of films wasn’t nearly as compelling.
“There are so many crappy films in theaters these days,” she said. “I would rather use that money to eat hot pot with friends.”
Of the six major Hollywood studios, Walt Disney Co. fared the best in China. It was able to release eight films that collectively grossed almost $1 billion, more than the other five studios combined.
Comcast Corp.’s Universal Pictures was in fourth place. The studio is watching the recent release “The Great Wall” closely, since it will pick up the much-anticipated U.S.-China co-production with Matt Damon for release in the U.S. in February. One of the most highly promoted movies of the year in China, “The Great Wall” has grossed about 895 million yuan through Thursday, according to EntGroup, a bit below expectations.
Sony Pictures Entertainment was the weakest performer among Hollywood’s six major studios, with none of its releases cracking the list of top 50 films in China. This year, Sony Pictures signed a deal with China’s entertainment powerhouse and largest cinema owner, Dalian Wanda Group Co., to help market its productions in China.
China’s slowdown in box-office growth means it is no longer expected to top the U.S. as the world’s biggest cinema market in 2017, which seemed likely after last year’s sharp uptick. But the country remains a bright spot for the global film industry. The number of screens in China grew almost 25% this year to more than 40,000 as theater construction spreads to second- and third-tier cities, according to EntGroup.
With the box office still growing, albeit more slowly, analysts say China can also support more foreign theatrical releases without harm to its domestic industry. In the year ahead, Hollywood will be looking to raise the 34-film quota, which was negotiated in 2012 and is due to be revisited by U.S. and Chinese officials in 2017.
“This is still a very, very important market, and it’s very profitable for companies to do business there,” said Michael V. Lewis, chief executive at RealD, the leading provider of 3-D technology to filmmakers and theaters. RealD recently signed a deal with Dalian Wanda for an additional 4,000 screens. The higher-priced format has become especially popular with Chinese moviegoers, while the U.S. appetite for it has waned in recent years.
“On a population basis, China is still underscreened,” Mr. Lewis said. “We’re not looking at saturation anytime soon.”
Source: Wall Street Journal by Wayne Ma and Erich Schwartzel